{"id":186994,"date":"2023-03-20T06:50:39","date_gmt":"2023-03-20T10:50:39","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=186994"},"modified":"2024-01-24T12:14:14","modified_gmt":"2024-01-24T17:14:14","slug":"chart-advisor-energy-under-pressure","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/chart-advisor-energy-under-pressure\/","title":{"rendered":"Chart Advisor: Energy Under Pressure"},"content":{"rendered":"\n<p><strong><a href=\"https:\/\/www.investopedia.com\/contributors\/54841\/?utm_source=chart-advisor&amp;utm_campaign=fwd_chartadvisor&amp;utm_term=27774019&amp;utm_medium=email\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>By&nbsp;<\/strong><\/a><strong><a href=\"https:\/\/www.investopedia.com\/contributors\/54841\/?utm_source=chart-advisor&amp;utm_campaign=fwd_chartadvisor&amp;utm_term=27774019&amp;utm_medium=email\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>J.C. Parets<\/strong><\/a>&nbsp;&amp;&nbsp;<a href=\"https:\/\/get.allstarcharts.com\/?utm_source=chart-advisor&amp;utm_campaign=fwd_chartadvisor&amp;utm_term=27774019&amp;utm_medium=email\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>All Star Charts<\/strong><\/a><\/strong><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-friday-17th-march-2023\">Friday, 17th March, 2023<\/h2>\n\n\n\n<p><strong>1\/ New Lows for Crude Oil &amp; Energy Stocks<\/strong><\/p>\n\n\n\n<p><strong>2\/ Mid Caps Make New Lows<\/strong><\/p>\n\n\n\n<p><strong>3\/ Rocky Week for Rates<\/strong><\/p>\n\n\n\n<p><strong>4\/ What Happens After Inversions?<\/strong><\/p>\n\n\n\n<p><em>Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-1-new-lows-for-crude-oil-energy-stocks\">1\/ <strong>New Lows for Crude Oil &amp; Energy Stocks<\/strong><\/h2>\n\n\n\n<p>While the weakness in the&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/f\/financial_sector.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">financial sector<\/a>&nbsp;received most of the attention this week, energy stocks performed even worse, dropping nearly 7% this week to a five-month low.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/03\/1-13-1100x546.png\" alt=\"\" class=\"wp-image-186995 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/546;\" \/><figcaption class=\"wp-element-caption\"><strong>Source: All Star Charts, with data provided by Optuma<\/strong><\/figcaption><\/figure>\n\n\n\n<p>At the same time, crude oil plunged more than 13% this week, recording its worst week since it briefly fell into negative territory nearly three years ago. It broke below $70 per barrel for the first time since December of 2021, closing the week at its lowest level in 15 months.<\/p>\n\n\n\n<p>Energy stocks (<a href=\"https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=XLE&amp;hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">XLE<\/a>) are trying to hold above their 2018 highs, but the outlook doesn\u2019t look good for the sector with crude oil below its respective highs. Crude oil and related energy stocks are unlikely to resolve in opposite directions. If oil prices continue to fall, we could expect energy stocks to follow suit in the coming days and weeks.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-2-mid-caps-make-new-lows\">2\/ <strong>Mid Caps Make New Lows<\/strong><\/h2>\n\n\n\n<p>The S&amp;P Mid Cap 400 ETF (<a href=\"https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=MDY&amp;hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">MDY<\/a>) fell 2.5% in today&#8217;s session, closing at its lowest level since November.<\/p>\n\n\n\n<p>As you can see in the&nbsp;chart below, price is barely undercutting the 61.8%&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/f\/fibonacciretracement.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">retracement<\/a>&nbsp;of the recent rally off the October lows.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/03\/2-14-1100x546.png\" alt=\"\" class=\"wp-image-186996 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/546;\" \/><figcaption class=\"wp-element-caption\"><strong>Source: All Star Charts, with data provided by Optuma<\/strong><\/figcaption><\/figure>\n\n\n\n<p>Sellers became increasingly aggressive as they pushed prices lower this week.&nbsp;As long as we&#8217;re below 436, the risk would be to the downside for mid-cap stocks, and there is an elevated probability of revisiting the 2022 lows.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-rocky-week-for-rates\">3\/ <strong>Rocky Week for Rates<\/strong><\/h2>\n\n\n\n<p>The bond market just experienced one of its most volatile weeks in history.<\/p>\n\n\n\n<p>When it comes to the middle and long end of the&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/y\/yieldcurve.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">yield curve<\/a>, the U.S. 10-year and 30-year Treasury yields are challenging key former highs.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/03\/3-16-1100x546.png\" alt=\"\" class=\"wp-image-186997 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/546;\" \/><figcaption class=\"wp-element-caption\"><strong>Source: All Star Charts, with data provided by Optuma<\/strong><\/figcaption><\/figure>\n\n\n\n<p>As you can see, this polarity zone coincides with the June highs from last year and the pivot lows from February, making it a critical level of interest.<\/p>\n\n\n\n<p>If yields violate this level, we could expect further strength from long-duration assets such as bonds and&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/g\/growthstock.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">growth stocks<\/a>&nbsp;in the foreseeable future. However, a bounce&nbsp;from current levels could keep the trend intact.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-4-what-happens-after-inversions\">4\/ <strong>What Happens After Inversions?<\/strong><\/h2>\n\n\n\n<p>The 10-2-year&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/y\/yieldspread.asp\" target=\"_blank\" rel=\"noreferrer noopener\">yield&nbsp;<\/a><a href=\"https:\/\/www.investopedia.com\/terms\/y\/yieldspread.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">spread<\/a>&nbsp;just reversed higher in record fashion, rising at a faster pace than we\u2019ve seen in decades. An&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/i\/invertedyieldcurve.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">inverted yield curve<\/a>, or negative spread between shorter and longer-duration yields, is a widely-used&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/l\/leadingindicator.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">leading indicator<\/a>&nbsp;for predicting&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/b\/bearmarket.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">bear markets<\/a>&nbsp;and&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/r\/recession.asp?hid=aa5e4598e1d4db2992003957762d3fdd7abefec8&amp;did=8612177-20230317&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=031723\" target=\"_blank\" rel=\"noreferrer noopener\">recessions<\/a>.<\/p>\n\n\n\n<p>Throughout history, the yield curve has typically inverted 12 to 18 months ahead of an impending recession.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/03\/4-14-1100x546.png\" alt=\"\" class=\"wp-image-186998 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/546;\" \/><figcaption class=\"wp-element-caption\"><strong>Source: All Star Charts, with data provided by Optuma<\/strong><\/figcaption><\/figure>\n\n\n\n<p>But what happens when the spread is no longer inverted? If we move back into positive territory, does that mean a recession will no longer hit?<\/p>\n\n\n\n<p>Unfortunately, history shows that\u2019s not the case. As shown in the chart, the selling pressure doesn\u2019t tend to arrive for stocks until after the inversion, once yield spreads widen again.<\/p>\n\n\n\n<p>During the last three inversions, it wasn&#8217;t until spreads started to rally higher that the stock market experienced significant downside volatility. In fact, the stock market entered a bear market following the inversions and reversals of 2001, 2007, and 2020.<\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p>Originally posted 17th March, 2023<\/p>\n","protected":false},"excerpt":{"rendered":"<p>While the weakness in the\u00a0financial sector\u00a0received most of the attention this week, energy stocks performed even worse, dropping nearly 7% this week to a five-month low.\u00a0<\/p>\n","protected":false},"author":186,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21,14,15,18,6,8,9,22,23,26,3],"tags":[7530,207,2223],"contributors-categories":[13686],"class_list":{"0":"post-186994","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-commodities","7":"category-etfs","8":"category-fixed-income","9":"category-macro","10":"category-north-america","11":"category-region","12":"category-securities","13":"category-stocks","14":"category-technical-analysis","15":"category-text-articles","16":"category-traders-insight","17":"tag-mdy","18":"tag-spx","19":"tag-xle","20":"contributors-categories-investopedia"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast 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